Kenya: Donor Pressure On Sugar Firms Sale

Nairobi — Development partners are unhappy with the slow pace of privatising government-owned sugar millers, which was expected to inject efficiency needed to survive in the competitive global market.

Stakeholders have cast doubt over the speed of privatisation with less than a year to the expiry of the Common Market for Eastern and Southern Africa (Comesa) safeguard measures.

Though the government insists the process is on course, the donor community says local sugar companies will have to bear with stiff competition from regional millers when the safeguards lapse.

Mr David Njuru, a rural development officer with European Union's Kenya office, says the sluggish pace coupled with lack of political will is causing anxiety in the sugar industry.

He says the time remaining are not sufficient to reduce government influence in the firms as demanded by Comesa council of ministers.

"In order to improve the local sugar industry from its current status, government has no option other than reducing its influence in the companies to make them competitive," he said.

Mr Mwangi said that in comparison to regional producers, Kenya sugar industry is by far the most expensive thus requiring sound reorganisation.

He warned that if by next year sugar factories will not have been privatised there will be no reason for the government to ask for an extension.

Agriculture permanent secretary Dr Romano Kiome last week confirmed that Cabinet last year approved the concept paper detailing the intended privatisation of in the next 10 months.

He defended the government against claims that it is not committed in reducing its shareholding in the companies saying the sale plan has to be scrutinised by all relevant authorities.

"There is consensus within government circles that it is only by privatising the sugar companies that high productivity in addition to increasing income to growers and government as well can be achieved," he said.

Mr Kiome said that government agreed to waive a Sh59.01 billion debt for the sector. Out of the total arrears, Sh35.5 billion is debt sugar companies directly owe the government, Sh6 billion is outstanding to industry regulator - Kenya Sugar Board - while the balance is interest accrued.

Government has stake in five sugar companies - Miwani, Muhoroni, Nzoia, Chemilil and South Nyanza Sugar Company (Sony).

On March 1, 2012, the local sugar industry will be fully opened to imports from across the region.

The sugar firms are part of more than 20 State corporations earmarked for sale to generate proceeds to fund development projects.

Mr Kiome says sugar industry is the most subsidised agriculture sub sector but has been recording dismal performance. He said the process of inviting expression of interest once the plan gets Parliament nod will move fast.

"It has been the government desire to privatise the sugar firms with the view of making them competitive in the region but there has been a lot of resistance from various quarters. However, we have made inroads as to how the process will be undertaken. We are aware of resistance by the section of players but we have no otherwise but go it that way," said Mr Kiome.

Privatisation commission executive director and CEO Mr Solomon Kitungu says the detailed privatisation proposal approved by the Cabinet last year is awaiting presentation to the parliamentary Finance, Planning and Trade Committee for further consultations as required by the Privatisation Act, 2005.

Mumias Sugar Company managing director Evans Kidero says his firm is preparing to acquire one of the firms to strengthen its competitiveness.

"Currently we are producing more than 270,000 metric tonnes of sugar accounting for more than half of the total sugar produced in Kenya. Our intention is to undertake more acquisition so that we can double turnover in the next five years," he said.

source: allafrica